In a two-period overlapping generations model with production, we consider
the damaging impact of environmental degradation on health and,
consequently, life expectancy. The government’s involvement on policies of
environmental preservation proves crucial for both the economy’s short-term
dynamics and its long-term prospects. Particularly, an active policy of
pollution abatement emerges as an important engine of long-run economic
growth. Furthermore, by eliminating the occurrence of limit cycles, pollution
abatement is also a powerful source of stabilisation.